Overview#

Morgan Stanley analysts have assessed the impact of the ongoing conflict in the Middle East on European travel and leisure companies. They conclude that the direct exposure of these companies to the conflict is relatively limited, with most effects concentrated in specific sectors.

Hotel Operators#

The investment bank highlights that major global hotel chains like IHG and Accor have only 5% and 8% of their rooms located in the Middle East, respectively. Their financial exposure is slightly higher due to their premium service offerings. Whitbread, another hotel operator, has local management contracts that account for less than 1% of its total revenues and is over 90% protected against fluctuations in gas prices. Notably, Scandic has no exposure to the region at all.

Cruise Lines and Tour Operators#

Cruise lines show minimal exposure to the Middle East, with only 0-3% of their annual operations affected, primarily from ships passing through the Red Sea. The financial impact of fuel price changes varies significantly; for instance, a $10 increase in oil prices could affect Carnival Corporation's earnings per share by 5%, while Royal Caribbean, which has some hedging in place, would see only a 1% impact. Tour operators like TUI report that around 1% of their guests are in the region, which they consider a minimal financial risk since this represents a small winter market. Meanwhile, summer destinations like Turkey and Egypt remain largely unaffected.

Airline and Indirect Effects#

Airlines have varying levels of exposure to the Middle East, ranging from 0-8% of their departing capacity. The impact of the conflict could lead to indirect effects on travel demand. According to the UN’s World Tourism Barometer, Europe welcomed about 800 million international tourists in 2025, compared to 100 million in the Middle East. If a significant number of European travelers shift their plans from the Middle East to European destinations, this could potentially increase hotel demand in Europe by around 1%.

Conclusion#

Morgan Stanley notes that historical data shows coastal markets in Spain, Greece, and Turkey experienced revenue growth following past regional conflicts. Additionally, higher costs for long-haul flights and complications with Middle Eastern stopovers may encourage European travelers to choose closer destinations this summer.